Rising fuel costs: Significant increase in gasoline and diesel prices observed in January
In the chilly month of January 2025, drivers across the continent were hit by a wave of higher fuel prices, particularly for diesel. The Automobile Club of Germany (ADAC) has attributed this rise to the increased demand for heating oil, a commodity that shares similar production processes with diesel, causing a ripple effect on its price.
The seasonal demand for heating oil, which kicks in during the colder months, is a key factor behind the surge. As temperatures drop, the need for heating oil increases, driving up its price and, in turn, diesel's. This seasonal demand effect begins to impact prices around August and can persist into the winter months, including January.
Another significant contributor to the price rise is the transition to cleaner diesel fuels. The shift to low-sulfur and cleaner-burning diesel fuel has significantly increased production costs, making diesel fuel generally more expensive than gasoline. This fuel specification change has made diesel about 40 cents more expensive per gallon than gasoline on average in the U.S., and the trend appears to be similar in Europe.
Export-related supply constraints, particularly in key regions like Russia, have also played a role in the price increase. Summer 2025 saw the reintroduction of export restrictions in Russia to curb fuel price spikes domestically caused by high exports and refinery maintenance. Although this pertains more directly to Russia, such policy moves reflect a global trend of tightening fuel supplies amid strong domestic seasonal demand, especially from farming and transportation sectors in January.
Diesel prices heavily depend on crude oil prices, which contribute around half the retail cost of diesel. Although crude prices softened somewhat in early 2025 compared to 2024, ongoing geopolitical tensions and refinery maintenance schedules constrain supply, keeping refining costs and fuel prices elevated.
The increased demand from commercial and construction sectors also contributed to the price rise. Diesel is heavily used in these sectors, especially during the winter and spring months, putting additional pressure on prices.
The average price for diesel in January 2025 was 1.678 euros per liter, with the price difference between diesel and Super E10 at a surprising 5.9 cents per liter. This is unusual as diesel should typically be around 20 cents cheaper. The cheapest time to fill up was on January 2nd, with the price for Super E10 at 1.705 euros and for diesel at 1.640 euros. Conversely, the most expensive day for filling up was January 20th, with Super E10 averaging 1.749 euros per liter and diesel reaching 1.705 euros per liter.
The rising oil prices also contributed to the fuel price increase, with the oil price temporarily reaching over 82 US dollars per barrel in January. Additionally, the increased CO2 tax at the beginning of 2025 raised fuel prices by around three cents per liter.
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What could be the impact of the energy sector on the finance industry, particularly in relation to diesel prices? The increased demand for heating oil, driven by seasonal factors and higher costs associated with the transition to cleaner diesel fuels, export-related supply constraints, and strong demand from commercial and construction sectors, have collectively contributed to the rise in diesel prices in the finance industry.
